GC “It’s not unlawful - can do”
CCO “Cannot do - goes against
the spirit of the law”
Advisor
Setting
Standards
Adopting
Standards
Enforcing
Standards
Following
Standards
Identification of “High-risk” Jurisdictions
2008
Evaluation
of Canada
---deficiencies
identified
Deficiencies
addressed
by Canada
Canada
removed
from
regular
follow-up
process
on Feb
2014
Next
evaluation
of Canada
2015
Financial/Capital
Regulation
Corporate
Governance
Regulation
Business
Conduct
Regulation
(Advisors)
You
FSCO
CCIR
IAIS
G20
FSCO’s
Mandate
CCIR’s Strategic Plan
Ensure that the Canadian
regulatory system meets
all internationally agreed
upon standards
U.S. Insurance Regulators
NAIC Works
Toward Uniform
Global Regulatory
Standards
April 3, 2009 News Release
IAIS
• Over 200 jurisdictions in some 140 countries
• Mission: Promote effective and globally consistent
regulation/supervision of the insurance industry
• Responsible for developing supervisory principles,
standards and guidance for the regulators
Advocis and IFB of Canada
2009 – 2010
Market Conduct
Survey of
35 countries
Most extensive sets of comparative
information ever collected in the field
1
Complex financial products
Complex decisions
2
3
Complex contracts and terms
4
Massive market power imbalance
5
6
7
Imperfect business conduct regulation
Deficient consumer redress mechanisms
Lax business conduct supervision
FTC
26 Insurance
Core Principles
Internationally Agreed ICPs
Advisor
Application
FTC
ICP 1
Objectives, Powers and Responsibilities of the Supervisor
ICP 2
Supervisor
ICP 3
Information Exchange and Confidentiality
ICP 4
Licensing
ICP 5
Suitability of Persons
ICP 6
Changes in Control and Portfolio Transfers
ICP 7
Corporate Governance
ICP 8
Risk Management and Internal Controls
ICP 9
Supervisory Review and Reporting
ICP 10
Preventive and Corrective Measures
ICP 11
Enforcement
ICP 12
Winding-up and Exit from the Market
ICP 13
Reinsurance and Other Forms of Risk Transfer
ICP 14
Valuation
ICP 15
Investment
ICP 16
Enterprise Risk Management for Solvency Purposes
ICP 17
Capital Adequacy
ICP 18
Intermediaries
ICP 19
Conduct of Business
ICP 20
Public Disclosure
ICP 21
Countering Fraud in Insurance
ICP 22
Anti-Money Laundering and Combating the Financing of Terrorism
ICP 23
Group-wide Supervision
ICP 24
Macro-prudential Surveillance and Insurance Supervision
ICP 25
Supervisory Cooperation and Coordination
ICP 26
Cross-border Cooperation and Coordination on Crisis Management
Conduct of Business
Principle
19
• The regulator sets requirements for the conduct of
business to ensure customers are treated fairly.
Standard
19.2
• The regulator requires advisors to establish and
implement policies and procedures (codes) on the
FTC that are an integral part of their business culture.
Acting with care when dealing with customers
Providing customers with clear information, before
during and after the point of sale (disclosure)
Reducing the risk of sales which are not appropriate to
customers’ needs (product suitability)
Ensuring that the advice giving is of a sound quality
Managing conflicts of interest properly
Handling customer complaints in a fair manner
Avoiding unfair or deceptive acts and practices
Protecting personal information on customers
What is your
How do you
most valuable
protect it?
asset?
Risk-based Regulation
FTC
Product
Suitability
Risk
Risk-based Regulation
Outcome
Product Suitability
Life Insurance Agent
Questionnaire
FSCO is conducting a review to
understand and assess the process
that advisors use at the point of sale
in making suitable product
recommendations.
Industry reference document
The Approach: Serving the client
through needs-based sales practices
Proactive identification of issues:
Sound knowledge of the risks
which may impede desired
marketplace outcomes increases
the probability that solutions can
be found before potential risks
become major problems.
• Compliance Risk
• Governance Risk
• Culture Risk
International Standard 19.6
The regulator (FSCO) requires
advisors to ensure that, where
customers receive advice before
concluding an insurance contract,
such advice is appropriate, taking
into account the disclosed needs
of the customer.
Principle 6 - Responsible Business
Conduct
Advisors should assess the related
financial capabilities, situation
and needs of their customers
before agreeing to provide them
with a product, advice or service.
Responsibility to Consumers:
Acting in the best interests of the consumer could include
evaluating and assessing the needs of the consumer, including
their financial situation and attitude to risk, and using that
information to ensure that appropriate products and services
are presented and discussed.
2013 Insurance Banana Skins Survey
International Standard 19.7
The regulator requires advisors to ensure
that any potential conflicts of interest are
properly managed.
High-level Principle #6
When conflicts of interest cannot be
avoided, advisors should ensure proper
disclosure, have in place internal
mechanisms to manage such conflicts, or
decline to provide the product, advice or
service.
Identification of “High-risk” Advisors
•Culture
We
customers
• Strategic
business plan
• Protocols or
approaches
• TCF core
values
February 3, 2014
Constrained by limited resources, FSCO has adopted both a
reactive and industry-wide targeted approach to supervising
large numbers of insurance advisors.
The provincial authorities should continue to harmonize
their COB regimes, while ensuring adequate supervisory
resources for effective COB supervision. FSCO should be
equipped with adequate resources and financial capacity to
deal with the size and diversity of the Ontario marketplace.
Increasing the Effectiveness of Supervision
Consultative Document, November 18, 2013
Guidance for regulators on Risk Culture
This paper identifies the
foundational elements
that contribute to the
promotion of a sound risk
culture. It aims to assist
regulators in identifying
those core practices and
attitudes that may be
indicators of risk culture.